“Ghost Stocks” Uncovered Again

A case of false payments for a capital increase issue of new shares was uncovered. These so called “ghost stocks” make investors feel more insecure.

The Securities Exchange said on January 9, that it was revealed that Dreamland (formerly Diable), a PC accessories sales company, did not pay for a capital increase issue of new shares planned to be listed for purchase on January 13. The Securities Exchange took steps by issuing indictments and stopping the buying and selling of shares.

The shares that Dreamland intended to list were 600 in total, worth approximately 1.98 billion won (about $1.65M). Fifteen participated including the president, Hwang Byung-ho, using a third-person allocation method. The company has taken related proceedings since it decided on a capital increase issue of new shares to be purchased, but the false paying was uncovered as the Securities Exchange improved its oversight. No actual damage occurred because the situation was discovered before the listing.

However, the securities market became strained with the sense that there is a likelihood of additional similar crimes and so-called “ghost stocks.”

Moreover, like the case of Dreamland, small sized offerings under two billion won (about $1.66M) can avoid the Financial Supervisory Service (FSS)’s actual investigation because they are free from the duty to submit a statement.

On the other hand, shareholders who are damaged by the “ghost stock” cases of four companies exposed by the FSS are preparing legal steps.

Minor shareholders of Dong-A Precision Machinery organized a shareholder’s meeting through a bulletin board of Paxnet, an online stock information provider, and now are working on damage claims and the designation of counsels. They also plan a provisional disposition, officials’ suspension and provisional seizure of those who are profiteering.

They stated that they collected eight million stocks (11 percent) so far from 1.25 million shareholders.

Jung-Eun Lee lightee@donga.com